US debt is more stable and trustworthy

8. US debt is more stable and trustworthy

Nelson, Analyst in International Trade and Finance 12

Rebecca M. Nelson, Analyst in International Trade and Finance, 2-29-12, [“Sovereign Debt in Advanced Economies: Overview and Issues for Congress,” Congressional Research Service, www.fas.org/sgp/crs/misc/R41838.pdf] E. Liu

Some analysts,52 as well as some Members of Congress, have expressed concern that the United States is headed towards a debt crisis similar to those experienced by some Eurozone countries, including Greece, Ireland, and Portugal. They are concerned about loss of investor confidence and the loss of the United States’ ability to borrow at reasonable interest rates. Like these Eurozone countries, it is argued, the United States has been reliant on foreign investors to fund a large budget deficit, resulting in rising debt levels and increasing vulnerability to a sudden reversal in investor confidence. S&P’s downgrade of long-term U.S. debt in August 2011 reinforced concerns about the U.S. commitment and ability to repay its debt. Other economists argue that the U.S. debt position is much stronger than that of the Eurozone economies in crisis.53 Unlike Greece, Portugal, and Ireland, the United States has a floating exchange rate and its currency is an international reserve currency, which can alleviate many of the pressures associated with rising debt levels.54 Additionally, they argue that the stronger levels of economic growth and the lower borrowing costs of the United States put U.S. debt levels on a more sustainable path over time. Even with the S&P downgrade, the U.S. credit rating is still higher than the crisis countries. The United States also has a strong historical record of debt repayment that helps bolster its reputation in capital markets. Greece, by contrast, has been in a state of default about 50% of the time since independence in the 1830s.55 Bond market data indicate that investors do not view the United States in a similar light to Greece, Ireland, or Portugal. Figure 6 compares the spreads on Greek, Irish, Portuguese, U.S., and UK 10-year bonds (over 10-year German bonds) since 2008. Higher bond spreads indicate higher levels of risk. U.S. bond spreads have remained substantially lower than Greek, Irish, and Portuguese bond spreads throughout the Eurozone crisis. U.S. bond spreads have been much closer in value to UK bond spreads, even during the financial crisis that originated in the U.S. housing market.

Spending – AT: Crowd Out

Short-term stimuli don’t crowd out the private sector by lowering interest rates

Günter Coenen, Head of the Econometric Modelling Division of the Directorate General. Research at the European Central Bank, et al., 10

Günter Coenen, Head of the Econometric Modelling Division of the Directorate General. Research at the European Central Bank, et al., Christopher Erceg, Charles Freedman, Davide Furceri, Michael Kumhof, René Lalonde, Douglas Laxton, Jesper Lindé, Annabelle Mourougane, Dirk Muir, Susanna Mursula, Carlos de Resende, John Roberts, Werner Roeger, Stephen Snudden, Mathias Trabandt, and Jan in ‘t Veld, 3-10, [“Effects of Fiscal Stimulus in Structural Models,” International Monetary Fund, www.imf.org/external/pubs/ft/wp/2010/wp1073.pdf] E. Liu

The size of the multiplier will depend on the expected persistence of the fiscal stimulus measure. Our focus for most of the paper is on fiscal expansions that are, and are perceived to be, temporary, and that therefore do not result in long-run crowding out of private spending.8In such cases, a two-year expansion will have significantly larger multiplier effects than a one-year expansion even in the first year, but only under monetary accommodation. The reason is that a more persistent boost to demand creates higher in‡ation over a longer period, thereby causing a more powerful reduction of real interest rates. Compare, for example, figures 22 and 23 with figures 1 and 2 for the United States and figures 64 and 65 with figures 43 and 44 for Europe. In each case, the expectation of two years of fiscal stimulus results in a large increase in the size of the multiplier even in the first year of the stimulus. But in the case of Europe the differences are smaller than in the United States, as the stronger nominal rigidities in Europe limit the effect of higher demand on in‡ation and real interest rates.

✈Topicality Answers
Infrastructure – We Meet

NextGen improves on infrastructure through the FAA

bin Salam, Fellow, Eno Center for Transportation, 12

Sakib bin Salam, Fellow, Eno Center for Transportation, 4-12, [“NextGen Aligning Costs, Benefits and Political Leadership,” Eno Center for Transportation Policy, https://www.enotrans.org/store/research-papers/nextgen-aligning-costs-benefits-and-political-leadership] E. Liu

On the technology side, NextGen is composed of two main components: aircraft based equipment that records and transmits the exact location of the aircraft using Global Positioning System (GPS), and ground based infrastructure that can receive and analyze the GPS data. Infrastructural improvements also entail devising more direct and fuel-efficient routes, and upgrading the computer and backup system used at 20 Federal Aviation Administration (FAA) air traffic control centers nationwide. The infrastructure implementation is currently in the hands of the FAA and funded by the Airport and Airway Trust Fund (AATF), while aircraft equipage is expected to be paid for by the operators.

Infrastructure Investment – We Meet

Implementing NextGen is investment in infrastructure

Wilson, Contributing writer, Aerospace America, 10

J.R.Wilson, Contributing writer, Aerospace America, 5-10, [“A Slow Transformation,” AEROSPACE AMERICA/MAY 2010 31, http://www.aerospaceamerica.org/Documents/May%202010%20Aerospace%20America%20PDF%20Files/30_NextGen_MAY2010.pdf] E. Liu

Commenting on those plans in mid-January, Blakey expressed the mixed feelings that have begun to permeate the industry’s view of NextGen: “While we are greatly encouraged by the progress demonstrated so far, there is still much to be done. Congress has opportunities in the jobs bill and the FAA reauthorization to promote accelerated implementation of NextGen and incentivize further investment in our aerospace infrastructure. We estimate the total number of direct and indirect jobs generated by an approximate $6-billion investment in NextGen equipment at more than 150,000 through 2012, with 30,000 jobs generated the first year.”
Cost Estimate

Government agencies agree NextGen costs 14-20 billion

bin Salam, Fellow, Eno Center for Transportation, 12

Sakib bin Salam, Fellow, Eno Center for Transportation, 4-12, [“NextGen Aligning Costs, Benefits and Political Leadership,” Eno Center for Transportation Policy, https://www.enotrans.org/store/research-papers/nextgen-aligning-costs-benefits-and-political-leadership] E. Liu

According to the FAA, the total infrastructure cost of NextGen through 2025 is approximately $15 billion-$20 billion. However, the FAA has not published its cost breakdowns for individual infrastructure projects. To the best of our knowledge, the only published source for the project costs is the recent GAO report that tracks the status of NextGen projects and associated costs. Based on that report, Table 7 shows 30 major NextGen programs with FAA approved budget and schedule,29 with an estimated total cost of about $14.243 billion.

Last printed 9/4/2009 07:00:00 PM

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